number of changes affecting pension plans were enacted by the last session of Congress. These changes are effective in A general for plan years beginning aRer 1996. Many of these changes will provide greater flexibility for pension plan providers. Others will provide some options for employees covered by qualified plans.
Distributions May Be Delayed Beyond Age 70-1/2
For years beginning aRer 1996, a qualified plan participant, other than a 5-percent owner, can defer the receipt of distributions until April 1 of the year after his or her retirement, even if that occurs aRer reaching age 70-1/2. The owner of an IRA will continue to be required to begin receiving distributions by April 1 of the calendar year in which he or she reaches 70-1/2. This means that individuals who have not yet retired when reaching 70-1/2 will be able to defer receipt of pension plan distributions. For a participant who is currently receiving distributions, but would not be required to under the new rules, the plan, or annuity contract, could permit him or her to stop receiving distributions until required to under the new rules. This provision to stop distributions is optional for the plan or annuity.
If a participant retires aRer age 70-1/2, the accrued benefit must be actuarially adjusted to take into account the period after age 70-1/2 during which no distributions were made. This adjustment and the exception covering a &percent owner do not apply to governmental or church plans. The actuarial adjustment also does not apply to defined contribution plans.